Should You Open an IRA at a Bank Or a Credit Union?

IRAs offer tax advantages when saving for retirement. They’re an effective complement to employer-sponsored plans like 401(k), and especially useful for those who’ve reached their maximum contributions limit in their 401(k).

Before opening one, however, be sure to consider aspects such as fees, investment options and any restrictions or limitations associated with banks and credit unions before making your choice.

1. Convenience

Credit unions provide an array of financial services, from checking and savings accounts, loans and investment accounts like an IRA to the ability to open an account easily either in-person or online.

Some credit unions also provide SEP IRAs for self-employed individuals and small business owners; these accounts resemble regular IRAs but allow for higher contribution limits, can be managed by an employer and come equipped with higher contribution limits. Furthermore, some offer services known as robo-advisors which make investing decisions based on your goals.

When opening an IRA with a credit union, be aware of fees such as monthly maintenance and ATM withdrawal charges. If these are an issue for you, search for one without them; additionally compare rates between credit unions and banks in order to find the most competitive offer.

2. Fees

When selecting an online brokerage to manage your IRA, look for one with low or no account minimums and minimal transaction fees. Betterment offers an investment management service at 0.25 percent to help manage your entire portfolio for you – an attractive choice for people seeking professional investment advice with long-term horizons like retirement.

Credit unions may provide individual retirement account (IRA) share certificates or certificate deposit accounts (CDs), which provide fixed-rate interest over time. Be sure to find out which options your bank or credit union provides that comply with IRS contribution limits of $6500 for 2023 (and $7500 if 50+).

If you prefer not to do the legwork yourself, consider opening an IRA account at a robo-advisor. These automated investment platforms select investments based on your goals, time horizon and risk tolerance.

3. Taxes

Pszenny notes that many banks and credit unions offer Individual Retirement Account (IRA) savings accounts. Some specialize in offering special versions of certificates of deposit (CD) or share certificates designed specifically for IRA accounts; meanwhile others allow customers to hold any regular CDs or shares in an IRA account. It’s best to contact the institution to determine which products qualify for inclusion into an IRA account, according to Pszenny.

IRA accounts provide investors with access to stocks, bonds and exchange-traded funds (ETFs). Individuals may choose to manage their IRA portfolio themselves while others use professional financial advisors or robo-advisors for advice.

Not everyone relies solely on individual retirement accounts like IRAs for savings and investments, however. Many also utilize traditional and Roth 401(k) retirement accounts, as well as personal investments outside their workplace, to help ensure they have enough income when they retire and sidestep some potential pitfalls associated with employer-sponsored plans like rule changes and limited investment options.

4. Investment options

If you’re considering investing your IRA savings, a brokerage firm might offer more choices – at a greater expense, however.

Most banks that provide IRA accounts typically limit investments to CDs and money market accounts – similar to traditional savings accounts – which do not experience as much market volatility but typically generate lower returns than a portfolio consisting of stocks and bonds.

Credit unions take a more flexible approach to IRA savings than most banks do; many offer IRA share certificates which act similar to regular CDs but allow you to invest directly into an IRA account.

For additional assistance when opening an IRA, consider engaging a financial advisor. SmartAsset’s free tool matches you up with up to three vetted advisors serving your area who will interview you without incurring an interview fee – another way we strive to help our users live smarter financial lives.


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